States that have legalised marijuana have raked in more than $9.7 billion in cannabis tax revenue since mid-2021, with new data from the U.S. Census Bureau showing significant growth. This marks a substantial increase of nearly $1 billion since the Bureau’s last update in September 2024.
The third quarter of 2024 alone brought in about $734.8 million, underscoring the continued expansion of legal cannabis markets across the U.S. However, some states are still reporting relatively low cannabis revenue figures, highlighting the uneven growth of the industry.
Billion-Dollar Growth in Cannabis Tax Revenue
The U.S. Census Bureau’s recent update on marijuana tax revenue is a striking indication of how quickly the legal cannabis market is maturing. Since mid-2021, total marijuana tax revenue has surpassed a staggering $9.7 billion, a testament to the expanding footprint of legal cannabis sales across the U.S.
In the third quarter of 2024, states collectively reported $734.8 million in marijuana tax revenue. This was a notable increase from the previous quarter, contributing to a billion-dollar jump in the last three months. The second quarter saw a similar revision, with the Bureau updating revenue from $609.9 million to $840.4 million, setting a new quarterly record.
This consistent rise in revenue points to the growing acceptance and demand for legal cannabis, as more states embrace adult-use marijuana markets and existing markets continue to mature.
Top-Performing States: California, Michigan, and Washington Lead the Way
The latest data highlights the states with the most significant cannabis tax revenue. As expected, California continues to dominate, collecting $159.6 million in Q3 2024. The state’s robust market, large population, and established legal framework continue to yield impressive tax returns.
Other states with sizable cannabis revenue include Michigan, which reported $79.3 million, Washington State with $77.3 million, and Illinois, contributing $72.8 million. These figures underscore the fact that the most populous states with well-established adult-use cannabis markets are driving the majority of revenue.
Meanwhile, more restrictive states like Louisiana and Mississippi posted significantly lower figures, with Louisiana bringing in only $284,000 and Mississippi just $385,000 in Q3 2024. Washington, D.C., which has legalised marijuana for adults but prohibits non-medical sales, reported no significant tax revenue, further illustrating the disparity in cannabis-related earnings across the country.
Cannabis Revenue’s Growing Share of State Budgets
Alongside total tax revenue figures, the Census Bureau’s data also includes a breakdown of the percentage of total state tax revenue derived from cannabis. For some states, marijuana has become an increasingly significant contributor to their overall budgets.
Montana saw the highest proportion of its state revenue come from cannabis, with marijuana taxes making up 1.57% of total state tax receipts in Q3 2024. Colorado followed closely at 1.19%, while Alaska rounded out the top three with 1.16%.
These figures provide a glimpse into how states with mature cannabis markets are seeing more substantial portions of their budgets funded by marijuana tax revenue, reflecting the expanding role of cannabis in public finance. However, for many other states, the percentage remains relatively small, highlighting the challenges faced by markets still in their early stages of development.
Significant Shifts in Cannabis Tax Revenue from Q2 to Q3 2024
The most recent update from the Census Bureau shows some significant shifts in cannabis revenue. States like Rhode Island, New York, and Washington, D.C., experienced the largest increases in marijuana tax revenue, with quarterly growth of 37.3%, 28.3%, and 27.4%, respectively. These numbers reflect the rapid maturation of licensed cannabis markets in those regions, suggesting that as legalization becomes more entrenched, cannabis revenues will continue to grow.
Conversely, some states saw notable declines in revenue. Washington State, for example, saw a dramatic drop of 48.4% in Q3 2024 compared to the previous quarter. Other states such as Connecticut, Massachusetts, and Arizona also reported significant decreases in their cannabis tax revenue, with drops ranging from 15.3% to 30.7%.
These fluctuations illustrate the volatility that can come with newly legalised markets, where factors like market saturation, regulatory changes, and consumer behaviour can all influence revenue generation. Despite the occasional downturn, however, the overall trend remains positive, with many states seeing significant year-over-year growth in cannabis tax collections.
Incomplete Data and Gaps in the Census Bureau’s Tracking
While the Census Bureau’s data provides valuable insights into the size and scope of the legal cannabis market, it also comes with some limitations. Notably, the agency’s tracker is an “experimental data product,” and data is often incomplete. Some states, including Nevada, New Jersey, and Arkansas, have not reported cannabis tax revenue for Q3 2024, despite submitting data in previous quarters.
This incomplete data set means that the true size of the cannabis tax revenue across the U.S. may be even larger than reported. Still, the data offers a useful snapshot of the market, providing insights into how the cannabis industry is evolving and how state governments are relying on this revenue source.
Furthermore, the numbers are based on calendar quarters, meaning the revenue reported for Q3 2024 reflects sales made during the preceding quarter. This lag in reporting further complicates any real-time analysis of the market.
Federal Efforts to Track Cannabis Revenue
Despite the growing success of state-level marijuana legalisation, cannabis remains illegal at the federal level in the U.S. This incongruity poses challenges for policymakers and regulators who seek a clear, accurate picture of the industry’s overall size and impact. The Census Bureau’s tracking tool is part of the federal government’s ongoing efforts to collect more data on the cannabis market, even as Congress continues to debate federal marijuana reform.
As the cannabis industry continues to grow, data tracking will only become more crucial for understanding its economic impact, both at the state and national levels. While the federal government may be slow to act on full cannabis legalisation, efforts like the Census Bureau’s data tracking initiative will help provide a clearer picture of how this industry is shaping the future of public finance in the U.S.
